Judge Reopens Trump IRS Lawsuit, Questions $1.776B Fund

A federal judge in Florida has ordered the Justice Department to address claims that a recent settlement in a $10 billion IRS lawsuit may have involved deception, placing a newly created $1.776 billion compensation fund in doubt.

Judge Kathleen Williams, appointed by President Obama, had dismissed the case after President Donald Trump and his family voluntarily withdrew their suit against the IRS. The suit stemmed from the 2024 conviction of IRS contractor Charles Littlejohn, who leaked confidential tax returns belonging to Trump, his sons, and hundreds of other taxpayers. Williams reversed course after 35 former federal judges, backed by the Democracy Defenders Fund, filed a motion alleging the settlement was premised on fraud against the court.

The settlement, reached this month, established the $1.776 billion fund to compensate individuals who claim improper targeting by the federal government. Acting Attorney General Todd Blanche stated that Trump and his family are ineligible for payments and will have no role in selecting the fund's commissioners. A DOJ spokesperson described the former judges' motion as frivolous and routine.

Williams set a June 12 deadline for responses on whether the case should be reopened on fraud grounds. In a footnote, she questioned whether provisions shielding Trump from future IRS audits were properly connected to the original claims under Justice Department rules.

Republicans in Congress learned of the settlement through news reports while negotiating an immigration spending bill, contributing to the Senate's failure to pass the measure before recess. Democrats have labeled the fund a slush fund. A separate federal judge in Virginia has already paused further implementation pending litigation.

The underlying allegations of IRS data protection failures remain unaddressed by any ruling. The fund's future and any payments depend on the outcome of the reopened proceedings.